Posted in Access to healthcare, Consumer-Driven Health Care, Deductibles, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Health Insurance, Health Savings Accounts (HSA's), Healthcare financing, Medical Costs, Medical Practice Models, out-of-pocket costs, Patient Choice, Policy Issues, Price Tansparency, Uncategorized

Deductibles and HSA’s: The Devil (and the truth) is in the Details | LinkedIn

AKA…

HSA’s: The Good, the Bad and the Unexpected

free-money1

The quote below is worth pondering.

We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).                                                                                  What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics Zarek C. Brot-Goldberg, Amitabh ChandraBenjamin R. HandelJonathan T. Kolstad

These findings seem to contradict, or at least not support, another large study that clearly show a trend towards substantial savings when patients are spending more of their own money or when trying to make their deductible dollars go further.

If the conclusions are valid and can be broadly applied, it would call into question a presupposition that most healthcare economists have held for quite some time: That being, when patients become medical consumers and are confronted with choices of how to spend their own money, they shop around and find better value and also don’t consume unnecessary medical services.

The summary of this newer study  published by the National Bureau of Economic Research seems to indicate that they don’t shop smarter, they don’t shop at all; but instead all the savings was from simply cutting back on all care.

This is potentially troubling on the surface. It appears to indicate that when presented with high deductibles, that patients just stopped getting as much care! Could this really be true?

Before we delve into the internals of this study, lets look at what other studies have shown. RAND Health researchers compared families before and after moving to a consumer-directed plan with similar families remaining in traditional plans to see how behaviors change in response to switching to a high-deductible plan.

  • In the most comprehensive study to date on this topic, researchers looked at claims and enrollment data for more than 800,000 households insured through 59 large employers across the U.S. in a study funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation. The analysis shows clear cost reductions, but with potential areas of concern for the long-term health of enrollees.”
  • Families with HDHPs had 17 – 21% reduction in health care costs
  • …”those in CDHPs initiated less care, and when they did, they used fewer or less expensive services in a given episode of care. Enrollees used 4.9 percent fewer name-brand drugs, made 6.5 percent fewer visits to specialists, and had 17.7 percent fewer hospital stays…”
  • Vulnerable populations are not adversely affected by use of HDHPs…“key finding is that in almost all cases, CDHP benefit designs affect lower income populations and the chronically ill to the same extent as non-vulnerable populations. These effects include significant reductions in overall spending that increase with the level of the deductible and greater reductions for high deductible plans when paired with health savings accounts (HSAs) in comparison to health reimbursement arrangements (HRAs).

 

Now let’s take a closer look at the newer NEBR study and see what it really tells us. Here is the description of the circumstances of this observational study: 

  • “Kolstad and his co-authors looked at the case of a large, unnamed company that shifted more than 75,000 workers and their dependents from a plan with no deductible to one with a $3,750 deductible. When the change happened, workers received a $3,750 subsidy to a health savings account — money they could spend freely on whatever health costs they incurred. The company also gave workers online tools to look up prices for doctor visits, tests, and other services they might need.”
  • Here are some data from the study: “Average per-patient spending fell from $5,222.60 in 2012 to $4,446.08 in 2013. That’s about a 15 percent decline in a single year — and it held true across all types of health services. Between 2012 and 2014, there was a 25 percent drop in emergency room spending, an 18 percent decline in physician office visits, and a 6 percent decrease in mental health services.” “But when the researchers looked at why spending dropped, they found it had nothing to do with smarter shopping. The average price of a doctor visit wasn’t dropping. Instead, under the high-deductible plan, workers just went to the doctor way less. The paper finds that “spending reductions are entirely due to outright reductions in quantity.”

This is an odd, but interesting study, at the same time. It was designed to judge patient’s responsiveness when given choices of how to spend their healthcare dollars and to see if they would be better shoppers due to having a high deductible. Yet the employer funds the HSA with amount equivalent to the deductible.

Stay with me… So they go from zero price barrier situation where we have no idea how much of that consumption was unnecessary where the employee is completely price insensitive… to a situation where they have a high deductible fully financed by their employer in form of an HSA that the employee owns. That is free money that grows forever tax-free unless they take it out for something other than qualified expense. If they cash it out, they pay penalty and the tax, but it is still their money.

But why would the authors of the study anticipate a drop in the cost of the average doctor’s office visit due to “smarter shopping” when the deductible payments are coming from an account funded by someone else’s money? Who’s the smart one now?

Recall from above that the employer funded the HSA fully and in advance. And for those that made a prioritized decision not to go to the doctor as much as they did in the co-pay only scenario, they got to keep that deductible money because they own the HSA forever, as opposed to an Health Reimbursement Arrangement (HRA) or Flexible Spending (FSA) which are both use-it-or-loose-it propositions and unused funds are retained by the employer.

Here is something else to consider. Were there even any cash-friendly or alternative practice such as DPC available for them to chose? If the network was fairly tight with high level of provider participation, I would not expect posted CPT prices to vary all that much. And they likely ran all encounters through the billing cycle so they were billed out at the regular CPT posted rates.

Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

Also, notice that the employees moved from a zero deductible plan to a fairly high deductible plan. We really have no way of knowing how much unnecessary or redundant care they might have consumed under the zero deductible plan, so we can’t speculate except to say it is hard to believe very much thought was given regarding necessity under the old plan when out-of-pocket cost were basically just co-pays.

If I were the employee in that situation, here is my thought process when it comes to spending my HSA money: If I really need medical care or want to get something done or want a certain test, who cares how much it costs, I’m not out anything really. And, If I don’t really need care, I get to keep the “free” money in an account I own forever even if I change employers . 

The design of the health plan causes a situation where there is simultaneously both price insensitivity when spending was needed AND an incentive not to spend as much due to the fact that the employer funded the deductible and because of the savings vehicle chosen, that being an HSA. Is it any wonder the study results show that the employees did not learn to price-shop?

This employer-funded HSA is extremely important when analyzing what happened. Remember, they went from essentially nearly free care to an employer-funded HSA that covers their entire deductible… and an HSA is the EMPLOYEE’S money once it hit the account.

So the design of the plan resulted in the employer essentially paying the employee NOT to consume medical services! And when they did spend their deductible dollars, they had no incentive to care about price because it was “free” money basically like a pre-paid gift card!

The study authors apparently failed to recognize this reality and instead proclaimed that high deductibles don’t lead to better consumers, just less consumption!

Let that sink in. One one hand the employees simply made a choice that favors their own economic self-interest by accumulating someone else’s cash in their HSA if care wasn’t really necessary in their view; and on the other hand they spent freely if the need arose for the same reason.

And how many people honestly would let their own health suffer when they could have used someone else’s money to pay deductible expenses? So what does that tell you about how much potentially unnecessary care was consumed in the zero deductible plan? Furthermore, there is no data indicating anyone suffered because of less consumption under the high deductible plan.

Now if they had offered employee a percent of savings in any given expenditure, paid as cash award, then you bet you would have seen some savvy shoppers.

Let me be clear, HDHPs are not the answer to controlling healthcare cost and will not result in a total alignment of priorities and incentives. Do they help move the needle in the right direction? I think yes. But the answer lies in establishing a real non-insurance market for routine care that is free of the baked-in inflation and price confusion/dishonesty of our billing protocols. Only a market with real prices will allow consumerism to work its magic. We are not there yet.

Based on the design of the health plan in this study, it is impossible to conclude that high deductible plans don’t produce smarter shoppers, because their was an incentive NOT to spend built into this particular plan and there was no reason to care about price because the deductible was funded by employer money. It their attempt to neutralize the potential negative effect of the deductible on medically necessary utilization, the plan design made the outcome a foregone conclusion. But the study does show that the employees outsmarted the authors of the study by simply acting in their own self-interests and exercising good judgement.

This study does teaches us four important things:

  1. People can easily be paid to do nothing to accumulate someone else’s money (legally).
  2. We tend to spend “free” money or other people’s money with less discrimination than when it is our own.
  3. Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

  4. Never take a headline at face-value or believe a study without reading it yourself.

Source: Understanding Healthcare Economics: The Devil (and the truth) is in the Details | LinkedIn

Posted in Access to healthcare, advance-pricing, Consumer-Driven Health Care, CPT billing, Economic Issues, Employer-Sponsored Health Plans, Free-Market, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, medical inflation, Patient Choice, Patient-centered Care, Policy Issues, Price Tansparency, Quality, third-party payments, Uncategorized

The Ten Free-Market Commandments to Restoring Financial Sanity in Healthcare | Robert Nelson, MD | Pulse | LinkedIn

Source: The Ten Free-Market Commandments to Restoring Financial Sanity in Healthcare | Robert Nelson, MD | Pulse | LinkedIn

Posted in Access to healthcare, British National Health Service, Cartoons, Economic Issues, government incompetence, Government Regulations, Government Spending, Healthcare financing, Organizational structure, Policy Issues, Uncategorized, Wait times to see a doctor

The U.K.’s Government-Run Healthcare System Is Working Wonderfully…for Bureaucrats | International Liberty

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector…

Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of …

Source: The U.K.’s Government-Run Healthcare System Is Working Wonderfully…for Bureaucrats | International Liberty

Posted in Access to healthcare, Affordable Care Act (ObamaCare), DC & Related Shenanigans, Economic Issues, Government Regulations, Government Spending, Healthcare financing, Medical Costs, medical inflation, Medicare, News From Washington, out-of-pocket costs, Policy Issues, Reforming Medicare, Uncategorized

Best Kept Secret In Washington DC: The Future Of Medicare – Forbes

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John C. Goodman

The fact that Medicare has been put on a sound financially footing – for the first time in its history – has never appeared in any official government announcement. Ditto for the fact that the disabled and the elderly may bear a heavy cost along the way.

These facts have not been in the headlines of any major newspaper. They have not been addressed in any news article. To my knowledge they have never been discussed in any opinion editorial. Even more surprising, they are repeatedly ignored by scholars and in scholarly reports at think tanks around the country (other than my own).

Eerie as it may seem, the entire country has been acting as though these incredible public policy changes have never occurred.

Here is a third thing l bet you don’t know. Although Republicans have criticized the “Obama cuts in Medicare spending” as threatening access to care for the elderly, the GOP alternative essentially does exactly the same thing.

What no one bothered to discuss was the much bigger budget story: an enormous reduction in future Medicare spending and its impact on the health and financial well-being of the 54 million people in Medicare.

Here is a bit more detail.

Source: Best Kept Secret In Washington DC: The Future Of Medicare – Forbes

Posted in Access to healthcare, advance-pricing, CPT billing, Deductibles, Direct-Pay Medicine, Economic Issues, Employee Benefits, Free-Market, Health Insurance, Healthcare financing, Medical Costs, Medical Practice Models, Medicare, Network Discounts, out-of-pocket costs, Patient Choice, Policy Issues, Price Tansparency, Uncategorized

Free The Patient – Forbes

257e412251dd752f730fd7cb60c52ee2
John C. Goodman

Who is likely to negotiate the lowest fee with a doctor, hospital or some other health care provider? The federal government? A large employer? An insurance company? Or, a patient spending her own money? Strange as it may seem, the answer is often the patient. One of the most persistent myths on […]

Canadians coming to the United States (and paying a cash price upfront) were paying almost half as much as US employers were paying and even less than the typical payment by Medicare. Think about that. These patients not only lacked a big bureaucracy to bargain on their behalf; they were foreigners.

The other factor is third party payment. After the deductibles and copayments are exhausted (which is almost immediately in the case of a knee replacement) the only payer is the third party. The incentive of the hospital is not to lower charges, but to raise them. In fact hospitals typically try to maximize against third-party payment formulas and they have sophisticated computer programs to help them do it.

An individual patient, paying with his own money and willing to travel to another city for care, is a different kind of buyer. If the hospital wants his patronage, it has strong incentives to compete on price.

This very large insurance company, representing tens of thousands of people and their very large employer (the state of California), achieved a remarkable reduction in costs by doing nothing more than sending patients into the hospital marketplace with the knowledge that the money they had to spend totaled no more than $30,000.

http://edge.quantserve.com/quant.js

Source: Free The Patient – Forbes

Posted in Access to healthcare, advance-pricing, Affordable Care Act (ObamaCare), Consumer-Driven Health Care, Deductibles, Defined Contribution Benefit Plans, Direct-Pay Medicine, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Essential Benefits under the ACA, Federal Exchanges, Free-Market, Government Spending, Health Insurance, Health Reimbursement Arrangement (HRA), Health Savings Accounts (HSA's), Healthcare financing, Independent Physicians, Individual Mandate, Individual Market, Individual ObamaCare Market, Individual Underwriting Standards, Insurance subsidies, Liberty, Medicaid, medical inflation, Patient Choice, Patient-centered Care, Policy Issues, Pre-existing Conditions, Price Tansparency, Private Exchanges, Quality, Reforming Medicaid, Self-Insured Companies, Self-Insured Plans, State-Run Insurance Exchanges, Subsidies, Tax Policy, Uncategorized, Uninsured

All the Problems plaguing ObamaCare are Solved by These 12 Bold Ideas

The Sessions – Cassidy bill:

Source: Summary | Goodman Institute for Public Policy Research

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Consumer-Driven Health Care, CPT billing, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Free-Market, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, Medical Practice Models, Patient Choice, Patient-centered Care, Policy Issues, Price Tansparency, Tax Policy, Third-Party Free Practices, Uncategorized

The One Thing… | Robert Nelson, MD | LinkedIn

Curly Knew…

I contend health plan networks and the multi-industry infrastructure that supports them, are simply a cartel propped up by unwise healthcare policy. They are definitely not part of a healthy functioning free-market.

Look carefully at the characteristics of how health plan networks operate and follow the money flow from start to finish. What holds it all together?  Despite its byzantine complexity and 40+ years of being entrenched into our national psyche, there is one linchpin that holds the whole perverse system together. Any guesses? What’s “The One Thing”?

 

Source: The One Thing… | Robert Nelson, MD | LinkedIn

Posted in Access to healthcare, Direct-Pay Medicine, Direct-Pay Practice Models, Doctor-Patient Relations, Economic Issues, Independent Physicians, Medical Costs, Medical Practice Models, Patient Choice, Patient-centered Care, Policy Issues, Prevention, primary care, Quality, The Quadruple Aim, The Triple Aim, Uncategorized, Wait times to see a doctor

The Solution to Making Our Healthcare System Affordable May Be a Lesson From Our Past | Jeffrey Gold | LinkedIn

Jeff Gold
Dr. Jeff Gold

For a state that prides itself on providing superior healthcare services for its citizens, Massachusetts is emerging as the state that no other state wants to emulate. No matter how much policymakers

Source: The Solution to Making Our Healthcare System Affordable May Be a Lesson From Our Past | Jeffrey Gold | LinkedIn

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